I am working on putting out a youtube video concerning the effects of china owning large sums of US dollars, i do these videos for my own entertainment and it furthers my understanding of complex topics. the point of my vnext video is that the effect of our large deficit (which is fueled by china's willingness to hold US dollars vs. their own currency) is creating large sums of money that flows into our financial system and is being injected directly into investments (ie. internet stocks, housing, private equity), eventually these investments are saturated with money and the bubble bursts.

my feeling is that our trade deficit is fueling this 800lb money guerilla that will inflate and explode every sector in our country that gives off the scent of growth. i was wondering if someone could explain to me how this trade deficit money is ending up being pumped into our financial system when china is buying t-bills. are they willed into existence by the fed, and the fed delivers the borrowed money to the banks? what is the flow of money? and lastly, do you know of a good source of info on this topic?